Which of the following is correct? The demand for money
A) decreases as the price level increases.
B) increases as real GDP increases.
C) increases when the nominal interest rate rises.
D) depends on the quantity of money.

Question

Quizplus · Accepted Answer

The demand for money increases as real GDP increases because people and businesses need more money for transactions and investment activities as the economy grows. Option A is incorrect because the demand for money typically increases as the price level increases, not decreases. Option C is incorrect because the nominal interest rate is the cost of borrowing money, not the demand for money. Option D is incorrect because the quantity of money affects the supply of money, not the demand for money.

Which of the Following Is Correct? the Demand for Money